Whether you’re building personal wealth or planning your retirement, a savings account isn’t going to offer the return you need for a comfortable lifestyle.
A savings account provides a safe place to park your money, but even if you choose a high-yield savings option, such as a certificate of deposit or a money market account, it might not offer the best return for your money. You need to go a step beyond your bank’s savings and explore investment opportunities that might double or triple your money.
If you speak with different money experts, everyone will have their opinion on the best investment strategies. Some people favor the stock market since it has an average return of eight percent a year. But this isn’t the only option available. Real estate investing is another winner, and some people have seen high returns investing in long-term rentals or wholesale properties, and buying and flipping properties.
Real Estate Investing vs. Stock Market
There’s no denying that the stock market historically outperforms other types of investments. And if you have to choose between investing in real estate and stocks, it might seem like a no brainer. Some people think the stock market is the better alternative because the real estate market is unstable at best. There’s no guarantee that property values will appreciate from year to year, and when home price gains slow or decline, investors take a serious hit.
Of course, the stock market isn’t much better. It’s known for its volatility and some people can’t stomach these unpredictable ups and downs. At the end of the day, if you’re trying to decide between stocks and real estate, stocks typically offer a better return, but there are no guarantees. The same way you can strike gold investing in the right stock at the right time, you can also profit purchasing real estate at the right time.
For example, you can buy a property way below market value, flip it for a profit or keep it as a rental property. Either way, you might walk away with tens of thousands of dollars in just a few weeks, or receive several hundred dollars in rental income every month — a return that can far exceed the average stock return.
You also need to consider potential costs associated with both investment options. Stock investing is typically cheaper than real estate investing. Online trading can cost less than $10 per trade. Even if you’re working under the guidance of a financial adviser, the commission you pay is considerably less than what you’d pay buying and selling real estate. In real estate, there’s the cost of buying a property (down payment and closing costs). And if a realtor sells your property, you’ll pay a six percent commission.
Stocks might have a history of better returns, but this doesn’t suggest you can’t win with real estate. Truthfully, there’s no way to know with certainty which option will bring in a higher return. It really depends on your stocks choices and current condition of the real estate market.
Filed Under: Borrower Tips, General, Housing Market, How-to
Tagged with: buying an investment property, investing, investing in real estate, investment property, real estate, real estate investment, real estate vs stocks